Central Banks' Monetary Policy Divergence - The week marked a "super central bank week" with the Bank of Japan, the Federal Reserve, the Swiss National Bank, and the Bank of England announcing their interest rate decisions amidst rising tensions in the Middle East and varying inflation pressures [2][3][4]. Bank of Japan - The Bank of Japan is expected to maintain its benchmark interest rate at 0.5% despite a revised zero growth in Q1 GDP and high inflation, particularly with rice prices doubling over the year [2]. - The focus is on potential adjustments to its bond purchasing plan, possibly slowing the planned quarterly reduction from 400 billion yen to 200 billion yen, with a hint that any rate hike may be postponed until Q1 2026 [3]. Federal Reserve - The Federal Reserve is likely to keep rates unchanged, with a core CPI of 2.8% and weak non-farm payroll data showing an increase of only 139,000 jobs [3]. - Market attention is on the dot plot for any signals of potential rate cuts, with Citigroup predicting a total of 75 basis points in cuts later this year [3]. Swiss National Bank - The Swiss National Bank faces a critical decision, with a 69% probability of a 25 basis point cut to 0% or even returning to a negative rate of -0.25% due to a negative CPI of -0.1% and an 11% appreciation of the Swiss franc [4]. - Such a move could increase volatility in the euro-Swiss franc exchange rate and raise concerns for pension funds regarding liquidity management [4]. Bank of England - The Bank of England is expected to maintain its rate at 4.25%, but deteriorating labor market conditions and a slowdown in wage growth may set the stage for potential rate cuts in August or November [4]. - Current rates are still considered in a "tightening zone," providing ample room for policy shifts, which may put short-term pressure on the British pound [4]. Market Reactions - The escalation of the Middle East conflict, particularly Iran's threats to block the Strait of Hormuz, combined with central bank policies, has heightened market volatility [5]. - U.S. stock indices fell sharply, with the VIX fear index surging by 22% and oil prices spiking by 12% in a single day [5]. - A hawkish stance from the Federal Reserve could strengthen the dollar, further suppressing capital flows to emerging markets, while dovish signals from Switzerland and the UK could provide temporary relief for risk assets [5].